These Contract Surety bonds are normally provided by the developer to the local municipality as a guarantee that the utilities, streets, sewers, and other land improvements of the developed property will be completed to the municipality’s satisfaction. These bonds are sometimes called Subdivision Bonds or Completion Bonds.
The Developer Bond is normally issued for an amount established by the municipality, based on the estimated value of the work required to make the specific land improvement. This bond provides the municipality with remedies in the event that the developer would default on its obligations under the developer’s agreement with the municipality.
Since bank financing is commonly involved, it is not unusual for the bonding company to ask the bank to participate in the developer’s obligations to the municipality, with the balance of the bank’s committed funds flowing to the bonding company in the event of the developer’s default.